Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
The Alphabet Soup Of Stocks
If youve ever watched financial TV or read financial papers, you may have heard of classifications like cyclical, growth and income stocks . As if the difference between preferred and common stocks wasnt enough, there are now more categories to add to the confusion! In this article, well try to replace the confusion with some clarity and logic.
Stocks and the Business Cycle
Many stocks can be broken into categories that denote the way in which different stocks perform during various times of the year or periods of the business cycle:
• Seasonal - These companies are characterized by the different levels of demand they face throughout the year. A snow shovel manufacturer, for example, is probably not very busy in the summer. Another seasonal effect is the increase in retail sales during the holidays. Butinvesting in seasonal stocks doesnt mean that you can automatically gain a healthy profit simply by purchasing a retail stock in the fall and selling it just after Christmas - not all seasonal stocks are guaranteed to do well, even during their peak seasons. When you analyzefinancial statements for a seasonal stock , you need to compare results to the same season of the previous year. (For related reading, see Analyzing Retail Stocks.)
• Non-Seasonal - These stocks are not affected by the change of seasons. Certain companies produce or sell goods that have what we call an inelastic demand curve. A good example is a peanut butter manufacturer - the demand for peanut butter is generally not affected by the weather or holidays.
• Cyclical - These companies, whose business activities intensely follow the business cycles of the economy, are always the first stocks to reflect a recession or an expansion. These companies dont necessarily intend to follow the business cycle, it just so happens that their products share this relationship with the economy. A good example of a company with cyclical stock would be a car manufacturer or an airline company. Luxury is one of the factors in the relationship between these stocks and the business cycle. Take Porsche, for example: when the economy is doing well, the sales of these fine automobiles rise. Conversely, when the economy goes into a slump, sales slow down.
• Non-Cyclical - This is the opposite of a cyclical stock. Profits of a non-cyclical stock do not change readily with the business cycle. These are companies that provide us with essentials, such as healthcare and food. Also referred to as defensive stocks, these stocks dont rely on the economic environment for increased sales. A perfect example is the diaper industry: regardless of whether the economy is busting or booming, parents have to buy diapers for their babies.
• Stocks and Dividends
Adding to the confusion, stocks are also classified according to their type of dividend payout schemes. Now remember, this is separate from what we have already discussed. Dividend payouts have little to do with the seasonal demands a company faces; instead, they are determined by each companys individual policies and objectives.
• Growth
- Growth stocks are known for their lack of dividends and rapidly increasing market prices. Defined by their tendency to grow faster than the market, these companies generally reinvest all earnings into infrastructure in order to maintain rapid growth, rather than directly paying out their earnings to investors. Young technology companies are often considered to be high growth, but the main characteristic of growth companies is that they believe that plowing earnings back into the research and development of new products benefits shareholders more than a dividend check every three months.
• Income - These stocks arent (usually) growth hungry, or theyve already reached their maximum growth potential. Income stocks prices do not tend to fluctuate a great deal. However, they do pay dividends that are higher than average. The value of an income stock depends on its reliability and track record in paying dividends. Generally, the longer a company has maintained dividend payments, the greater its value to investors. Historical examples of income stocks are real estate investment trusts (REITS) and utility stocks, many of which pay out annual dividends of 5% or more. (Learn how dividends benefit investors in The Power Of Dividend Growth.)Stock Slang Terms
Finally, the financial industry uses many slang terms to describe and categorize stocks. These terms arent always intuitive, but they do have their place in the financial world. Here are some of the many terms used to characterize stocks:
• Blue Chip – These are companies that are cream-of-the-crop, old-school and everlasting. Blue chips tend to be market mammoths, and have proven their ability to survive through both good times and bad. The term comes from poker, where blue chips are the ones with the highest value. These companies are generally expensive to purchase but can be safe bets. General Electric (NYSE:GE), Wal-Mart (NYSE:WMT) and IBM (NYSE:IBM) have all established themselves as blue chips.
• Penny Stock - The term penny stock is used to denote stocks that trade for less than a dollar, but can also refer to stocks that are considered very speculative. These stocks are generally new to the market, with no reputation or history to fall back on. Penny stocks present the possibility of large gains or losses. (For related reading, check out Spot Hotshot Penny Stocks.)
• Bo Derek – This is a term created by traders in the late 70s to describe the perfect stock. Back then, actress Bo Derek was considered the perfect 10. This slang term might be a little dated for a new generation of investors, as Bo Derek was famous in another era.
Conclusion
Now, how do these terms fit with one another you might ask? Well, next time you hear a cyclical income stock referred to as a real Bo Derek, youll know what it means. A stocks categorization can be varied and prone to change in different situations. Stocks that were once speculative may become blue chip, cyclical stocks can become non-cyclical due to some widespread economic changes and seasonal stocks may reduce their exposure to seasonal pressures by exporting goods. Changing times mean that dynamic companies will change their visions and goals. The important thing is to not only remember what category a stock falls under, but also how it compares to other stocks of the same group.
Behold the $SEGI BarChart Technical Analysis NITE-LYNX
http://www.barchart.com/technicals/stocks/SEGI
$MNEAF BarChart Technical Analysis NITE-LYNX
http://www.barchart.com/technicals/stocks/MNEAF
Finding Your Investing Comfort Zone
To participate in the financial markets , both short-term traders and longer-term investors need to be comfortable about their holdings and their specific portfolios. In other words, if a certain position leaves you with a sense of uneasiness or the inability to sleep at night, it is not for you! Knowing the boundaries of your personal comfort zone makes it easier to maintain a portfolio that contains only suitable positions. So how do you find and establish these boundaries? Read on to find out.
Why Should I Be Comfortable?
Establishing a comfort zone is particularly important for a number of reasons:
• An uncomfortable trader or investor may allow emotions to take control of trading decisions.
•
Those who are too complacent may ignore risk.
• Determining a comfort zone helps you avoid borderline trades that usually turn out poorly.
• It helps you recognize when risk has increased.
• It encourages you to take profits when very little profit potential remains.
• It minimizes the possibility that youll be forced to make difficult decisions under pressure. Being comfortable with your positions means that high pressure situations should occur rarely.Settling Into Your Comfort Zone
Being in the comfort zone means owning a portfolio that contains only suitable, well-researched and understandable holdings.
Arriving at this type of portfolio involves going over your holdings yearly and deciding whether the reasons that you bought the stock still apply. For the stocks that dont make the cut, sell those positions, even if it results in a loss. Technically, the loss has already occurred and, except for tax reasons, turning it from a paper loss to one that is realized makes no difference. Once youve done this, you can put your money to work where you believe it will increase in value.
When choosing new stocks for you portfolio, remember that not every investment tip is a winner. In fact, its best to ignore all tips and conduct your own research.
Long-Term Investor or Trader?
Despite the inconsistency of the markets, the vast majority of investors choose to adopt a long-only approach by purchasing stocks, bonds, real estate, collectibles, etc. If you have good stock and investment selection skills, this method will do well over time. If you dont, and prefer to manage your own portfolio, different skills are required. For example, it may be worthwhile to learn how options work and how you can use them to hedge risk in stock portfolios .
At the same time, long-term investors must understand when a position is no longer suitable, either because it has run up in price very quickly, or the company is not expected to perform well in the future. You should work hard at mastering this skill - the time to recognize that some positions are too risky to hold is before disaster strikes.
The way you decide to invest in the market will determine your comfort zone. Day traders hold positions for a very short time. Swing traders hold longer, but by no means do they attempt to make long-term trades. And then there are the investors who have no specified holding period - and for many, that means they expect to hold for years. Which category you fall into will affect your comfort zone. For example, the day trader doesnt worry about sleeping well because positions are not held overnight, and the long-term investor is less concerned with timing. The one characteristic these trades should have in common is suitability for the investor, who must find both the risk and reward potential of any position acceptable.
Becoming a full-time trader is a goal for many individual investors, who see it as a glamorous road to riches, but these perceptions are false. As with any other profession, it takes education, practice, skill and discipline to succeed. In the same way that not everyone can become a professional athlete or movie star, the simple truth is that not everyone can be a full-time trader. Keep this in mind when thinking about your comfort zone - if you dont succeed in making profits as a trader, you probably wont be very comfortable.
Trading Within a Comfort Zone
Both long-term investors and traders must make important decisions. Among the questions to consider are:
• Is this a good entry point?
•
Is this an appropriate time to invest?
• Is the security fairly priced?
• How much profit do I expect to earn?
• How much capital is at risk?
• Is it possible this trade can result in a margin call?
• Whats the probability of earning a profit?Summary
Its important to invest or trade so that you are comfortable with the nature of your holdings - and thats especially true when it comes to understanding both risk and reward. Once you find your comfort zone, staying within it will help you make better investment decisions. If a security doesnt fall within the parameters of your comfort zone, its not a good investment for you.
The OTC market does not have this limitation. They may agree on an unusual quantity, for example. In OTC market contracts are bilateral (i.e. contract between only two parties), each party could have credit risk concerns with respect to the other party. OTC derivative market is significant in some asset classes: interest rate, foreign exchange, equities, and commodities.
At this point though, we are still unsure if a large trading range will develop. The subsequent low in December, which was just higher than the October low, offers evidence that a trading range is forming, and we are ready to set the support zone.
Behold the $ECRY BarChart Technical Analysis NITE-LYNX
http://www.barchart.com/technicals/stocks/ECRY
Do You Need A Financial Advisor?
If you do your own investing, have you ever wondered whether you should turn things over to a professional advisor? This article attempts to shed some light on this topic and to provide you with some things to think about so that the best decision can be made.
When the Time Comes
Professional advisors say there is no magic asset number that pushes an investor to seek advice. Rather, it is more likely an event that spooks a person and sends him scurrying through an advisors door. The event could be something that requires the individual to manage an asset himself.
According to Charles Hughes, a certified financial planner in Bayshore, New York, the event typically involves either the receipt of or access to a large sum of money that the individual didnt have before.
When you reach a point in which youre constantly afraid that youre going to make a mistake with your investments, then you need professional advice, according to Raymond Mignone, a certified financial planner in Little Neck, New York.
Often, someone who has never spent or managed more than a few thousand dollars is looking at managing a six-figure or group of accounts.
If this happens to someone just about to retire, the decisions that need to made are more critical, as the retiree will want to make this money last. As such, people often seek professional advice just before they retire, because they feel that they need professional advice to make such long-term decisions.
When it comes to portfolio management , it is important to determine your plan of attack. Take the 401(k) plan, for example. When youre contributing to the plan, you may feel like its not your money. You cant do with it what you want because youll be penalized. But when retirement is coming and you can access that money, the question often arises about what you are going to do with it. For many, this can be when they decide whether they can manage their own affairs or whether they should seek professional advice.
Judging Yourself
The need for critical self evaluation is vital when determining whether or not to hire a financial planner. Advisors say the decision depends on the investor.
The following questions should help you sort out if you need an advisor:
• Do you have a fair knowledge of investments?
• Do you enjoy reading about investments and doing research?
• If you have expertise in investments? Do you have the time to monitor and evaluate them and make periodic changes to your portfolio?
If you answered yes to the above questions, you may not need an advisor or financial planner.
Not So Fast
However, Loren Dunton, one of the founders of the financial planning movement, says that many people who believe that they dont need a financial planner could benefit from one anyway.
Most people need a planner. The ones who dont need one are usually smart enough to use one, wrote Dunton in Financial Planning Can Make You Rich (1987).
So lets assume someone decides that, for any of the reasons stated above, he or she does need an advisor. Theres another difficult task: Finding the right advisor.
Finding the Right Financial Professional
How do you go about finding the right advisor? You should begin by asking for referrals from colleagues, friends or family members who seem to be managing their finances successfully. Another avenue is professional recommendations. A Certified Public Accountant or a lawyer might make a referral. Professional associations can sometimes provide help. These include the Financial Planning Associating (FPA) and the National Association of Personal Financial Advisors (NAPFA).
The client must also decide how the advisor will be paid. Some advisors charge a straight commission every time a transaction is recorded. Other advisors will charge a fee based on the amount of money they have been given to manage. Some fee advisors assess an hourly fee. As such, fee advisors can be very expensive, which could put them beyond the reach of many middle-class clients.
Fee advisors claim that their advice is superior because it has no conflict of interest. In other words, using an advisor paid through commissions, which is a payment received by an advisor or a broker whenever a transaction is recorded, can compromise an advisors integrity. As such, those who advocate fee advisors suggest that commission advisors may have an incentive to record too many transactions. However, commission advisors argue that their services are certainly less expensive than paying fees that can run as high as $100/hour or more.
The Wrong Advisor
If your advisor only records some transactions from time to time but never sits down and discusses long-term goals with you, you may want to look for a new advisor. Similarly, if you advisor never writes an investment plan to lay out your goals and assess whether they are being reached, you may be better served elsewhere.
A written plan for each client is critical. In addition, good advisors have semiannual conferences with clients and talk to their clients on a regular basis. In addition, a good advisor who is just beginning to work with a client should never recommend a product until he has learned a lot about his or her circumstances and goals. (For more insight, read Find The Right Financial Advisor.)
Finally, the individual should ensure that any financial professional has the proper credentials. Avoid any advisor who is little more than a broker, but calls himself a financial planner or advisor.
Many planners or advisors are only sellers of financial products. In fact, the term financial planner has been a much-abused term. A person can label him or herself as a financial planner, but not be a certified financial planner unless he or she has fulfilled the necessary credentials. Therefore, dont allow yourself to be impressed by the title on an advisors business card until you understand what qualifications and certifications he or she actually has.
Conclusion
The decision about whether or not to seek advice can be critical. If you do choose to seek advice, carefully choose the right professional for the job and you should be on your way to a better financial plan . If you decide to go it alone, remember if at first you dont succeed, you can try again ... or call an advisor.
“The Spread” is a term that applies to all markets and represents the difference between the highest bid price and the lowest ask price. For example if “the bid” is $10.00 and “the ask” is $11.00, then the spread is $1.00. The spread is one of the ways that broker-dealers, specifically market makers (a type of broker-dealer that provides liquidity by quoting and trading both sides of the market), make money.
Stocks and many other securities are judged in relative terms through the use of ratios such as PE, Price/Revenues and Price/Book. With this in mind, it also makes sense to analyze price movements in percentage terms.
This link will help thou $GDSI BarChart Technical Analysis NITE-LYNX
http://www.barchart.com/technicals/stocks/GDSI
Human Capital: The Most Overlooked Asset Class
December 11 2011| Filed Under » Investing Basics, Students, Young Investors
When most people think about asset classes, things like stocks, bonds, real estate and commodities come to mind. Investment advisors spend countless hours researching the risk/return profiles and correlations of these common asset classes, in an attempt to construct efficient investment portfolios for their clients.
Tutorial: Basic Financial Concepts
However, if you are a young to middle-aged investor, the importance of these asset classes pales in comparison to an asset class called human capital. Human capital is intangible and cannot be directly purchased or sold. For this reason, it does not get much financial press. If you are between the ages of 18 and 50, or you still act like you are, you may be interested in what human capital can do for you and how you can use it to grow and protect your financial capital.
What Is Human Capital?
If you learned about human capital in business school, it was probably defined from a business owners perspective, but what about from an individual investors perspective? To an individual investor, human capital is the present value of all future wages. When you are young, it is usually the most valuable asset that you own. Human capital is also your best protection against inflation. With a strong professional skill set, you will always command a fair wage, no matter how inflated your local currency becomes.
Anything you do to increase your ability to earn higher future wages could be considered investing in your human capital. The monetary and time-consuming investments that you make early in life, like obtaining a higher education, on-the-job training and learning better social skills, can increase your personal human capital. (To learn more about investing in your human capital, read Invest In Yourself With A College Education and Five Ways To Fund Your College Education.)
How Does It Affect Your Financial Capital Allocation?
Over your lifetime, your human and financial capital should go in opposite directions. As you age, you have the opportunity to use your human capital to increase your financial capital. It is an opportunity because financial capital is not a given; it is earned though wages, savings and smart investment decisions. (For more on this, see Young Investors: What Are You Waiting For?)
During your working career, the risk characteristics of your human capital should affect how you allocate your financial capital. Factors like job stability, income volatility and the industry sector in which you work should all be considered when selecting an asset allocation for your financial capital. Below are two examples of how the risk characteristics of your human capital can affect the asset allocation of your financial capital.
Example 1 - Investing in Company Stock
A highly specialized chemical engineer working in the oil industry would not want to have a portfolio heavily weighted in the energy sector, or even more obviously, her employers stock. Career specialization makes human capital concentrated and risky, from an industry standpoint. As such, the engineer can compensate for this risk by investing her financial capital in industries and companies with little or no correlation to her human capital.
For example, investing more of her financial capital into sectors like health care or telecommunications, could offer diversification and help her better manage the overall risks of her investment portfolio. (Learn more about investing in company stock in Your Employers Stock: Should You Buy In?)
Example 2 - Income Volatility and Investment Risk
A real estate broker would face more human capital risk than a pharmacist. The real estate broker may have a higher appetite for financial risk, but his wages are more volatile, more difficult to replace and less secure than the pharmacists. This extra risk makes the brokers income stream less valuable. All else being equal, he should compensate for this extra human capital risk, by owning a higher percentage of more liquid, less volatile, financial assets, relative to the pharmacists.
Protecting Your Human Capital
Like any other asset class, there are risks associated with your human capital. The two main risks are death or disability risk and professional competency risk.
Death or Disability Risk
When you are a young adult, it is very important to protect your human capital with both life and disability insurance policies. Doing so will protect you and your family against a possible human capital shortfall, due to an untimely death or a career-halting illness. This is especially true if your expected future financial obligations are high. As you get older, your need to hedge your human capital with insurance, should decrease. Decisions regarding protecting your human capital with life and disability insurance should be made in conjunction with the overall asset allocation decisions in your investment portfolio. (To learn more about term life and disability insurance, see Buying Life Insurance: Term Versus Permanent and The Disability Insurance Policy: Now In English.)
Professional Competency Risk
Your ability to earn future wages depends heavily on your professional competency. Becoming too comfortable with your career could pose a hidden risk to your human capital. Like many other valuable assets, human capital needs to be constantly monitored. You should always have goals for life-long learning and should stay current with industry trends and new technologies, to protect against this risk.
The Bottom Line
To young and middle-aged investors, human capital offers inflation protection and is a very important asset that should not be overlooked. All investment decisions should take into account the characteristics of both your human and financial capital. Your human capital should be protected with insurance and always open to further investment, through more education and on-the-job training. Famed investor Warren Buffett once said, The best investment you can make is always in yourself. It has never been a good idea to be on the other side of Mr. Buffetts trade. (To read more about Buffetts ideologies, check out Warren Buffett: The Road To Riches and Think Like Warren Buffett.)
The significant majority of broker-dealers quote the securities of SEC-reporting companies on OTC Link because the FINRA OTCBB does not have electronic trading capability. Broker-dealers must use OTC Markets Group’s OTC Link's trade messaging system to trade these securities electronically.
Trader's Remorse
Not all technical signals and patterns work. When you begin to study technical analysis, you will come across an array of patterns and indicators with rules to match.
NITE-LYNX $PFFBQ BarChart Technical Analysis
http://www.barchart.com/technicals/stocks/PFFBQ
Under the Securities Act of 1933, a company that offers or sells its securities must register the securities with the SEC or find an exemption from the registration requirements. The Act provides companies with a number of exemptions. For some of the exemptions, such as rules 505 and 506 of Regulation D, a company may sell its securities to what are known as "accredited investors."
Mutual Funds Vs. ETFs: Small Cap Stocks
John C. Bogle, the founder of investment management firm Vanguard, has estimated that the investment industry collectively shaves around 3% from stock returns each year. This stems primarily from the fees it charges for managing assets for individuals and institutions. Bogle has also openly questioned the value of actively managed funds over index funds. Exchange traded funds (ETFs) are another low-cost way to invest primarily in passive, indexed strategies. Not surprisingly, Vanguard was founded on low-cost index funds and has moved into ETFs, as have most other well-known firms in the industry.
Mutual Funds
The industry also likes to divide up stocks by market capitalization. Generally, active managers of large capitalization stocks have the worst track records when compared to their underlying index. An industry report from late 2011 estimated that two-thirds of large-cap mutual funds underperformed their index over the past three years. The best category was in the small-cap space, but 63% of active managers still underperformed. The only space where managers steadily beat their bogey was in the small cap international space of the market. The small-cap value category was also a relatively strong category.
Based on the above data, for the most part, investors would be well served to invest in index funds that simply look to match market returns. Standard small-cap indexes include the Russell 2000 and S
In addition to understanding the business, fundamental analysis allows investors to develop an understanding of the key value drivers and companies within an industry.
Behold the $MSVS BarChart Technical Analysis NITE-LYNX
http://www.barchart.com/technicals/stocks/MSVS
Asset Allocation: The First Step Towards Profit
Financial advisors and brokers, either full or limited service, rarely provide investors with an adequate and concise overview of the investment market. At least, not such that decisions on asset allocation can be made. Investors are faced with a plethora of options on where to put new money; a situation which is often overwhelming.
A primary investment decision is to choose asset classes, particularly equities or fixed income. This decision needs to be considered because each investor has unique objectives. Choosing between equities or fixed income , as well as making investment choices, affects the ability to achieve investment objectives. Individuals need to consider market conditions that are expected to persist over the coming months or years and the influence of economic policy, as well as individual circumstances.
Investment Decision Making
Asset allocation is a term tossed around by investment professionals to describe how to distribute investment dollars in order to achieve an expected rate of return based on certain factors. Individual investors should consider these factors, including current income and expected future income, investment time horizon and tax implications, to name a few. Over any 20-year period, investment returns from various asset classes have been mixed, thus resulting in high returns for one or a couple of consecutive years followed by low returns.
This means that if an investor puts all of his eggs in the same basket year after year, he will receive lower and more volatile returns than if he spread his investment dollars among various asset classes. There are decisions to be made regarding which asset classes to spread or to allocate investment dollars because certain combinations of investments are based upon the degree of aggressiveness (or risk tolerance) needed to meet objectives. Degree of aggressiveness is determined based on a persons age and time horizon as well as tax status. (See Matching Investing Risk Tolerance To Personality to find out more about this crucial step.)
In addition to the long-term perspective inherent in asset allocation decisions based on specific investment objectives, short-term effects on investments need also be taken into account. Short-term and long-term considerations can include, but are not limited to, interest rates and the policies of the Fed, economic outlook and currency.
For example, there are certain investments that do better in a low interest rate environment (equities over fixed income) and some that do well in a rising inflation environment, like treasury inflation protected securities (TIPS) and commodities, that protect the value of the asset (hard assets over soft assets). Currency fluctuations also affect investments. For example, if the dollar is weak vs. foreign currency from country X, then a company domiciled in the U.S. and has its expenses in U.S. dollars, but makes a majority of its revenue from country X, will likely benefit from the weak U.S. dollar. Therefore, the choice of asset class is an important decision for both a short- and long-term investment horizon.
Overview of the Asset Classes
Asset classes include equities and fixed income. Investing in equities means that the shareholder is a part owner in the company - he/she has an equity interest in the company but in the case of bankruptcy, has very little to no claim, resulting in a risky investment. Fixed income means that the investor receives a predetermined stream of income from the investment, usually in the form of a coupon, and in the event of bankruptcy, has senior claim to liquidated assets compared to shareholders. The fixed income traded in the public market is typically in the form of bonds.
Asset classes can be broken up into sub-classes. Sub-classes for equities include domestic, international (developed and developing or emerging countries) and global (both domestic and international). Within these divisions, equities can further be grouped by sectors such as energy, financials, commodities, health care, industrials etc. And within the sectors, equities can be grouped again by size or market capitalization, from small cap (under $2 billion) to mid cap ($2 billion-10 billion) to large caps (over $10 billion) stocks .
Sub-classes for fixed income include investment-grade corporate bonds, government bonds (treasuries) and high yield or junk bonds. The importance of breaking investments down into sub-classes is to manage the degree of risk generally associated with the investment. Investing in companies with small capitalizations and in developing countries has historically been more risky, but has had greater potential for higher returns than investments in large capitalizations, domestic companies. Similarly, due to its junior status to bonds, equity is generally considered more risky than fixed income.
Strategy
Proper asset allocation is the key to providing the best returns over the long term, but there are some general rules of thumb when investing that can help guide through the short term, normal fluctuations of the market. In the short term (one- to three-year time frame), the economy and economic policies of the government have significant influence on investment returns.
• Rule 1 - The stock market is a leading indicator, so its movement often precedes change in the economy that impacts labor, consumer sentiment and company earnings.
• Rule 2 - Policy and the impact of decision making by the government due to various economic data are mid to lagging indicators as to what the market is doing.
• Rule 3 - If you watch money flows (movement of money into and out of a particular stock, sector or asset class), when the chart shows a peak or bottom in money flow, you should do the opposite. Basically, a contrarian view may be best in this circumstance.
• Rule 4 - Options are most profitable in volatile markets. A good indicator of market volatility is the VIX (Chicago Board Options Exchange Volatility Index). At times when the VIX is expected to move higher, investing in options rather than owning the equity may sometimes be more profitable and less risky.
• Rule 5 - If there is a worry about rising inflation, buying protection via TIPS or hard assets like commodities usually insulates a portfolio.
• Rule 6 - In a market that is continually moving up, stock selection is often less important than buying the market, thus buying a market ETF or index fund may lead to high returns with lower risk. But in a market that is moving sideways, stock selection is key and investors need to understand the growth drivers of a companys stock.
Conclusion
Designing a portfolio that performs well in both the long and short term is obviously not easy to accomplish. However, weeding out a lot of the noise and concentrating on some simple rules in the short term, while focusing on proper and re-balanced asset allocation in the long term, can steer investors to a model portfolio that should produce less risky, more stable returns.
A technician believes that it is possible to identify a trend, invest or trade based on the trend and make money as the trend unfolds.
Investors in the OTC market vary in their knowledge and experience from large institutional money managers to retail investors. The goal of all of these investors is the same – to generate returns from their investment. OTC Markets Group facilitates information transparency in the OTC market by aggregating and disseminating real-time broker-dealer quote information and operating the platform for companies to provide financial and other corporate disclosure for investors.
This link will help thou $ECRY BarChart Technical Analysis NITE-LYNX
http://www.barchart.com/technicals/stocks/ECRY
4 Tips For Joining An Investment Club
Investing in the stock market can be intimidating - how to differentiate between the different types of securities, investing styles and trading strategies, analyzing market data, financials, and know when to act? And for beginners, this can be especially off-putting. Financial planners andbrokers are good sources of advice, but if you are interested in learning about the stock market and how to take control of your money, an investment club may be worth considering.
What Are Investment Clubs?
They can be found in most municipalities and regions, and have been around for decades as a way for people with limited funds to contribute and partake in larger investments as well as to get first-hand experience and education. Investment clubs are simply a group of people who pool their money in order to make joint investments, usually in stocks or bonds. While their primary motivation is to make the most money possible, clubs are also a great way for investors to share ideas and learn about the market.
How are Investment Clubs Set Up?
If you start a new investment club, it is a good idea to provide a solid structure to ensure the clubs agenda is carried out efficiently and without friction. An investment club is usually a legal partnership or a limited liability company consisting of 10-20 members. Once it is legally established, it is imperative that standardized accounting records are established for it. After all, unlike independent individuals investing directly into the stock market, an investment club pools money from each member.
After a member initially contributes an initial lump-sum for investment purposes, the typical investment club requires a monthly contribution of about $80 from members. Nevertheless, members may not contribute the same amount, nor be participants for the same durations. Therefore, an investment club must have a clear way of determining each members share at a given point in time since members are likely to be contributing funds on a periodic basis, and probably intend to withdraw funds from their share of the clubs assets at some time in the future.
Also, when first starting an investment club, be sure to establish a brokerage account in the investment clubs name. Shopping around for a suitable brokerage firm is a good idea, as different brokers usually have unique offers for investment clubs. (For more, see Choosing A Compatible Broker.)
To facilitate club decisions and member education, an investment club should schedule regular meetings at least once a month. Regular monthly meetings can be fun and insightful, as members present a stock they have researched and would like the club to consider buying. Club members carry the responsibility of researching potential investment purchases for the club and staying up-to-date on the performance and outlook of their holdings going forward. It is important that club members actively participate in the clubs portfolio construction and maintenance in order to maximize their own investment education - one of the key goals of an investment club. With that in mind, there are many steps an investment club can take to boost members opportunities to gain as much knowledge as possible.
Tips for Joining an Investment Club
Here are some pointers worth considering:
1.Think long-term
We cannot stress this enough. Dont buy stocks through an investment club if your time horizon is a year or less. Trying to make money over a shorter period of time is a wrong approach, not only for beginner investors, but also investment clubs. A short time horizon makes it difficult to manage the clubs money because, for short-term outlooks, decisions to buy or sell stocks need to be made very quickly. Also, most investment clubs meet only once a month, making it entirely impossible to make trade decisions for the short term. Club members should probably spend their time analyzing the fundamentals of stocks held in the club portfolio as opposed to concerning themselves with short-term movements in the clubs holdings.
Having a three- to five-year horizon is a common outlook among investment club strategies. As such, potential members should also consider joining an investment club as something of a long-term commitment of about three to five years. It is generally not very healthy for a club if members decide to leave and pull their money out after a short period of membership. Most investment clubs specify the rules or penalties for early withdrawal from the club at its inception. Most specify a liquidation price, or early-withdrawal penalty, which members must pay when withdrawing their funds, which is usually slightly lower than the value of their contributions. Generally speaking, anyone interested in starting or joining an investment club should consider it a minimum commitment of several years, and ensure all members in the club find that level of time commitment acceptable.
2. Define your style
Just as individual investors vary greatly from one another in terms of their investment style - such as value investing, income stock strategies or GARP - and so do investment clubs. It is very important for every investment club to have a clearly defined investment style, ideally with some amount of quantifiable rules or limitations on the clubs investment portfolio. For example, an investment club might specify that members can propose only stocks for purchase that have a minimum share price or market capitalization, or the club might place sector restrictions on the portfolio to ensure a minimum level of diversification always exists.
Also, for the benefit of members, it may also be useful for a new investment club to implement standardized criteria for reviewing a stock for potential purchase. This will ensure the club members increase their experience in specific areas of equity analysis, while allowing all members of the group to brief themselves better for standard material covered at meetings, and hopefully better understand the material presented to them.
Once an investment club has determined its style, it is important that every member is aware of the clubs investing style and willing to follow those guidelines. It can be very damaging to an investment clubs atmosphere when some members want to invest club funds in high-risk penny stocks while others gravitate towards blue chips. If you are starting the club, make sure every member understands and supports the clubs approach. If you are joining a club, make sure its style meets your needs. After all, there are many different types of investment clubs to be found, so before you follow through and become a full member, be sure to assess its investment style and try to judge how closely it matches your own aspirations. Chances are, you will learn much more, and enjoy a more rewarding experience if you spend a bit of time finding the investment club that best fits your personal investment style or objectives.
3. Join a club association
The National Association of Investors Corporation (NAIC) offers some excellent support and information for people wishing to join or start their own investment club in the United States. The NAIC not only provides excellent tools, but also publishes a monthly investor-learning magazine. Membership to the NAIC costs $40 for a new club, $30 for individual club members and $79 for individuals. According to NAIC data, the number of investment clubs registered with the association has seen strong growth in the early 21st century, and, to the chagrin of industry professionals, about half of all registered clubs have been able to outperform the S
Support Equals Resistance
Another principle of technical analysis stipulates that support can turn into resistance and vice versa.
FINRA has established OATSSM as an integrated audit trail of order, quote, and trade information for NASDAQ and OTC equity securities. FINRA uses this audit trail system to recreate events in the life cycle of orders and monitor more completely the trading practices of its members.
$IXMD BarChart Technical Analysis NITE-LYNX
http://www.barchart.com/technicals/stocks/IXMD
Pros And Cons Of Offshore Investing
Offshore investing is often demonized in the media, which paints a picture of investors stashing their money with some illegal company located on an obscure Caribbean island where the tax rate is next to nothing. While its true that there will always be instances of shady offshore deals, the vast majority of offshore investing is perfectly legal. In fact, depending on your situation, offshore investing may offer you many advantages.
Tutorial: Personal Income Tax Guide
What Is Offshore Investing?
Offshore investing refers to a wide range of investment strategies that capitalize on advantages offered outside of an investors home country. We will briefly touch on the advantages and disadvantages of offshore investing. The particulars are far beyond the scope of this introductory article.
There is no shortage of money-market, bond and equity assets offered by reputable offshore companies that are fiscally sound, time-tested and, most importantly, legal.
Advantages
There are several reasons why people invest offshore:
Tax Reduction - Many countries (known as tax havens) offer tax incentives to foreign investors. The favorable tax rates in an offshore country are designed to promote a healthy investment environment that attracts outside wealth. For a tiny country with very few resources and a small population, attracting investors can dramatically increase economic activity. Simply put, offshore investment occurs when offshore investors form a corporation in a foreign country. The corporation acts as a shell for the investors accounts, shielding them from the higher tax burden that would be incurred in their home country. Because the corporation does not engage in local operations, little or no tax is imposed on the offshore corporation. Many foreign companies also enjoy tax-exempt status when they invest in U.S. markets. As such, making investments through foreign corporations can hold a distinct advantage over making investments as an individual. (For additional information, read What is an Emerging Market Economy?)
In recent years, however, the U.S. government has become increasingly aware of the tax revenue lost to offshore investing, and has created more defined and restrictive laws that close tax loopholes. Investment revenue earned through offshore investment is now a focus of regulators and the tax man alike. According to the U.S. Internal Revenue Service (IRS), U.S. citizens and residents are now taxed on their worldwide income. As a result, investors who use offshore entities to evade U.S. federal income tax on capital gains can be prosecuted for tax evasion. Therefore, although the lower corporate expenses of offshore companies can translate into better gains for investors, the IRS maintains that U.S. taxpayers are not to be allowed to evade taxes by shifting their individual tax liability to some foreign entity. (To learn more, see How International Tax Rates Impact Your Investments.)
Asset Protection - Offshore centers are popular locations for restructuring ownership of assets. Through trusts, foundations or through an existing corporation individual wealth ownership can be transferred from people to other legal entities. Many individuals who are concerned about lawsuits, or lenders foreclosing on outstanding debts elect to transfer a portion of their assets from their personal estates to an entity that holds it outside of their home country. By making these on-paper ownership transfers, individuals are no longer susceptible to seizure or other domestic troubles. If the trustor is a U.S. resident, their trustor status allows them to make contributions to their offshore trust free of income tax. However, the trustor of an offshore asset-protection fund will still be taxed on the trusts income (the revenue made from investments under the trust entity), even if that income has not been distributed.
Confidentiality - Many offshore jurisdictions offer the complimentary benefit of secrecy legislation. These countries have enacted laws establishing strict corporate and banking confidentiality. If this confidentiality is breached, there are serious consequences for the offending party. An example of a breach of banking confidentiality is divulging customer identities; disclosing shareholders is a breach of corporate confidentiality in some jurisdictions. However, this secrecy doesnt mean that offshore investors are criminals with something to hide. Its also important to note that offshore laws will allow identity disclosure in clear instances of drug trafficking, money laundering or other illegal activities. From the point of view of a high-profile investor, however, keeping information, such as the investors identity, secret while accumulating shares of a public company can offer that investor a significant financial (and legal) advantage. High-profile investors dont like the public at large knowing what stocks theyre investing in. Multi-millionaire investors dont want a bunch of little fish buying the same stocks that they have targeted for large volume share purchases - the little guys run up the prices.
Because nations are not required to accept the laws of a foreign government, offshore jurisdictions are, in most cases, immune to the laws that may apply where the investor resides. U.S. courts can assert jurisdiction over any assets that are located within U.S. borders. Therefore, it is prudent to be sure that the assets an investor is attempting to protect not be held physically in the United States.
Diversification of Investment - In some countries, regulations restrict the international investment opportunities of citizens. Many investors feel that such restriction hinders the establishment of a truly diversified investment portfolio. Offshore accounts are much more flexible, giving investors unlimited access to international markets and to all major exchanges. On top of that, there are many opportunities in developing nations, especially in those that are beginning to privatize sectors that were formerly under government control. Chinas willingness to privatize some industries has investors drooling over the worlds largest consumer market. (To read more, see Investing Beyond Your Borders.)
Disadvantages
Tax Laws are Tightening - Tax agencies like the IRS arent ignorant of offshore strategies. Theyve clamped down on some traditional ways of tax avoidance. There are still loopholes, but most are shrinking more and more every year. In 2004, the IRS amended the Internal Revenue Code (IRC) and began to collect taxes from both American corporations that operate out of another country and American citizens and residents who earn money through offshore investments. (For more information on tax laws that affect offshore investors, see the IRS International Taxpayer - Expatriation Tax.)
Cost - Offshore Accounts are not cheap to set up. Depending on the individuals investment goals and the jurisdiction he or she chooses, an offshore corporation may need to be started. Setting up an offshore corporation may mean steep legal fees, corporate or account registration fees and in some cases investors are even required to own property (a residence) in the country in which they have an offshore account or operate a holding company. Furthermore many offshore accounts require minimum investments of between $100,000 and $1 million. Businesses that make money facilitating offshore investment know that their offerings are in high demand by the very wealthy and they charge accordingly.
How Safe Is Offshore Investing?
Popular offshore countries such as the Bahamas, Bermuda, Cayman Islands and Isle of Man are known to offer fairly secure investment opportunities. More than half of the worlds assets and investments are held in offshore jurisdictions and many well-recognized companies have investment opportunities in offshore locales. Still, like every investment you make, use common sense and choose a reputable investment firm. It is also a good idea to consult with an experienced and reputable investment advisor, accountant, and lawyer who specializes in international investment. If you are looking to protect your assets, or are concerned with estate planning or business succession, it would be prudent to find an attorney (or a team of attorneys) specializing in asset protection, wills or business succession. Of course, these professionals come at a cost. In most cases the benefits of offshore investing are outweighed by the tremendous costs of professional fees, commissions, travel expenses and downside risk. (For more information, see Investment Scams: Prime Banks.)
Conclusion
We are not lawyers, tax accountants or offshore investment experts in any country. Every individuals situation is different. Offshore investment is beyond the means of most investors, and above the risk tolerance of others.
Despite the many pitfalls of offshore investing, it can still pay off to shift some investment assets from one jurisdiction to another. As with even the most insignificant investment, do your research before parting with your money - unless youre prepared to lose it.
Price refers to any combination of the open, high, low, or close for a given security over a specific time frame.
OTCQB companies must be registered with and reporting to the SEC or a U.S. regulatory agency. There are no financial or qualitative standards to be in this tier.
How To Be A Stock Trader In 2012
If one of your New Years resolutions is to take control of your finances and put some of your savings to work, you might be considering using the stock market to do that. 2011 proved to be a tough year for even the bestinstitutional investor and individual traders had an equally tough time navigating markets that saw a large amount of violent swings, both to the upside and the downside.
If youre planning to enter the markets as a new trader this year, here are a few tips to consider as you put your money to work. (For related reading, see 4 Common Active Trading Strategies.)
Dont Trade for Real … Yet
Before you put your hard-earned money to work, spend some time trading fake money. Many brokerages and sites like Yahoo! Finance offer virtual or paper trading accounts that allow you to get a hands-on feel for how the markets work. Just like any new skill, you probably wont do very well with your first attempts. Use virtual funds to see if your investing decisions could potentially earn you money. Once you see that youre having success, put a small amount of real money to work. Continue to use your virtual account to test new strategies. Even the pros use virtual accounts to test the waters. (Use the Investopedia Stock Simulator to trade a virtual account, risk free!)
Learn How to Research
Its easy to make the mistake of relying on somebody elses research for investing decisions. There are two problems with this. First, somebody elses risk tolerance, investment objective and account size arent the same as yours. The trade may be right for them, but not for you. Second, they may tell you when to get into the trade but they likely wont tell you when to get out.
There are plenty of good resources that teach you how to research before you buy. Read books, talk to other traders and read company balance sheets, listen to conference calls and work to gain a real understanding of the markets. You can learn to excel at any endeavor through experience and study. Becoming a great money manager requires the same commitment. (To learn more, see Investing Books It Pays To Read.)
Say No to the Seminars
Every big city has an endless supply of weekend-long thousand dollar or more seminars that guarantee to make you the next great trader. Dont be fooled. They may have some good information, but if becoming a high-performing, profitable trader could happen over a weekend, everybody would do it. There are better ways to spend your money.
Dont Try to Win
Weve learned that in order to get ahead in this world, we have to be better than our competition. That isnt true in investing. If youre new to the markets, you arent going to beat the professionals. Even the professionals dont always beat other professionals. There are an exceedingly small amount of professional investors who have a consistent track record of beating others in the market. Aim to invest your money in products that tend to perform in line or slightly better than the market. Later, as you gain more investing experience, you can try your hand at some of the riskier trades.(For more information, read Measuring And Managing Investment Risk.)
Dont Make Money, Manage Risk
The professionals know that if you manage risk correctly, making money will naturally follow. Having a portfolio that includes a good supply of companies with a track record of success and that pay a healthy dividend, is good risk management. Only investing in products you truly understand, without looking to get rich quick, is the mark of a mature investor. You arent going to strike it rich by capturing short-term gains, so dont take the unnecessary risk of trying.
The Bottom Line
2012 promises to be another year of tough-to-navigate markets for even the best traders. Dont try to score the big win. Instead, use 2012 to be conservative with your money as you learn the complicated art of trading stocks.
$VLNX BarChart Technical Analysis NITE-LYNX
http://www.barchart.com/technicals/stocks/VLNX
After Lucent declined, a trading range was established between 40.5 and 47.5 for almost two months (green oval).
FINRA applies short sale delivery requirements to those equity securities not otherwise covered by the delivery requirements of SEC Regulation SHO. Reg. SHO applies to all securities of all reporting issuers whether listed for trading on an exchange or quoted in the OTC market. New Rule 4320 expanded Reg.
Golden Opportunity For Real Estate Investors
In August 2011, the Federal Housing Finance Agency (FHFA) announced their mandate to reduce the volume of real estate owned (REO) properties, stabilize property values in areas hard-hit with foreclosures and increase the supply of affordable rental housing in those same markets. In February 2012, the FHFA launched the REO-to-Rental Pilot Initiative that will attract smaller investors and increase private investment in REO properties.
FHFA Overview
The FHFA has regulatory and supervisory oversight over Fannie Mae, Freddie Mac and the Federal Home Loan Bank System. The agency worked with the Federal Reserve, the Federal Deposit Insurance Corporation (FDIC), theFederal Housing Administration (FHA), the U.S. Department of Housing and Urban Development (HUD), the Treasury Department and many state and local governments to develop the REO-to-Rental Pilot Initiative to increase participation from smaller and private investors to purchase, rehabilitate, manage and rent REO properties in areas with declining market values and deteriorating conditions.
How the Pilot Program Works
Potential investors will register and complete a pre-qualification form online. This establishes eligibility to bid on pools of foreclosures held in REO status with Fannie Mae in the initial pilot phase. Future offerings will include REO holdings from Freddie Mac and the FHA. Qualified investors include partnerships, trusts and individuals along with banks, non-profit agencies and for-profit real estate businesses.
Investors are required to hold and rent the properties for a specified time. They must also provide affordable rents and lease-to-own options. This program is not for short-term investors, but rather those who are committed to long-term holdings and will operate under a business model that includes housing counseling for prospective tenant-buyers.
The target properties are in areas that have high numbers of foreclosed properties, and high rental demand. Most properties will be vacant single-family residences withnonperforming loans that failed the short-sale process. Many two- to four-family units in a foreclosure status will also be available. Some properties offered will be existing tenant occupied properties; others include owners who remained as renters after a foreclosure.
Traditionally, REO sales focused on large institutional investors and individual owner-occupant buyers. This pilot program allows small individual investors to bridge the gap, and fill an important niche missing in many depressed housing markets – that is, participation from local real estate investors who reside in or near communities they invest in.
Requirements for Individual Investors
1. Net worth of $1 million, individual or joint.
2. Net income of $200,000 individual, $300,000 joint.
3. Experience buying, selling, developing, managing real estate with emphasis on risk management ability.
Can the Program Work?
Either Fannie Mae or the FHFA will have to provide seller financing in order to make the pilot program successful. This reduces the role of these agencies in the housing market, something consumer advocates, market players and lawmakers are calling for. This also provides access to ablanket mortgage or other similar lines of financing traditionally not available to small investors in some areas. Structure and oversight should use strategies that worked well in the past, such as those the Resolution Trust Corporation used to solve the savings and loan failures of the past. Investors need tax advantages similar to those available through real estate investment trusts. Finally, regulatory controls must deter practices that helped fuel the current housing crisis such as inadequate renter-buyer income verification, property flipping and ownership/chain of title fraud.
The Bottom Line
This is an excellent opportunity for individual real estate investors, developers and property managers to enter or re-enter the buy-to-hold and rental real estate market under favorable conditions.
For more information about the Federal Housing Finance Agencys REO-to-Rental Pilot Initiative, visit the REO Asset Disposition page on the agencys website. Serious investors should also complete the Investor Pre-Qualification Process at Fannie Maes HomePath website.
How Are Charts Formed?
We will be explaining the construction of line, bar, candlestick and point
This link will help thou $NILA BarChart Technical Analysis NITE-LYNX
http://www.barchart.com/technicals/stocks/NILA
There are no broker-dealers quoting this security. It is not listed, traded or quoted on any U.S. stock exchange or the OTC Markets. Trades in grey market stocks are reported by broker-dealers to their Self Regulatory Organization (SRO) and the SRO distributes the trade data to market data vendors and financial websites so investors can track price and volume. Since grey market securities are not traded or quoted on an exchange or interdealer quotation system, investor's bids and offers are not collected in a central spot so market transparency is diminished and Best Execution of orders is difficult.
A Beginners Guide To Managing Your Money
Online brokers and easy access to financial data make investing your money as easy as starting a savings account, but in a world where the Internet has made do-it-yourselfers out of many, is investing a do-it-yourself activity and if it is, why not just fire your financial advisor or pay less fees to your mutual funds and set up a portfolio of your own? See: Risk and Diversification
The Internet has changed the way we live our lives. Not long ago purchasing stock was not as easy as it is now. The order went through a complex network of brokers and specialists before the execution was completed. In 1983, that all changed with a dentist in Michigan who made the first online stock transaction using a system developed by what is now E*TRADE Financial. (For related reading, see Brokers and Online Trading.)
The Effect
That one trade changed how investment products are transacted, researched and discussed. Computerized trading has resulted in highly liquid markets making it easy to buy and sell most securities quickly. The do-it-yourselfer now has access to the same free financial data that the professionals use, and websites like Stocktwits set up entire communities of investors and traders who exchange information in real time.
But just because its possible, does that mean that managing your own money is a good idea? Professional investors have a saying, The stock market is an expensive place to learn how to invest . They understand that its easier to lose money than it is to make money, and because of that, some argue that the wealth of information available to people with little financial background may offer a false sense of security.
Tools are only as good as the knowledge and experience of the person using them. Does a high priced software package used by the worlds best composers result in beautiful music? Does the newest innovation in surgical technology make a person with no prior training in medicine a top performing surgeon?
Theres no doubt that the Internet has given the retail investor the tools that they need to effectively manage their own money, but what about the knowledge and experience to use the tools effectively? For an investor who wants to manage their own money, what types of fundamental knowledge should they have before firing their financial adviser? (To learn more, read 4 Steps To Building A Profitable Portfolio.)
Modern Portfolio Theory
First, understand modern portfolio theory (MPT) and gain an understanding of how asset allocation is determined for an individual based on their individual factors. In order to gain a true understanding of these principals, youll have to dig deeper than the top level Internet blog articles that tell you that MPT is simply understanding allocation. MPT is not just about the allocation but also its efficiency. The best money managers understand how to position your money for maximum return with the least amount of risk. They also understand that efficiency is highly dynamic as the person ages and their financial picture changes.
Along with efficiency comes the dynamic nature of risk tolerance. At certain points in our lives, our risk tolerance may change. Along with retirement, we might have intermediate financial goals like saving for college or starting a new business, the portfolio has to be adjusted to meet those goals. Financial advisors often use proprietary software that produces detailed reports not available to the retail investor. (Read how to determine What Is Your Risk Tolerance?)
Academic Understanding of Risk
In the plethora of free resources, risk is treated too benignly. The term risk tolerance has been so overused that retail investors may believe that they understand risk if they understand that investing may involve losing money from time to time. Its much more than that.
Risk is a behavior that is hard to understand rationally because investors often act opposite of their best interests. A study conducted by Dalbar, Inc. showed that inexperienced investors tend to buy high and sell low, which often leads to losses in short-term trades.
Since risk is a behavior, its extremely difficult for an individual to have an accurate, unbiased picture of their true attitude towards risk. Day traders, often seen as having a high risk tolerance, may actually have an extremely low tolerance because theyre unwilling to hold an investment for longer periods. Great investors understand that success comes with fending off emotion and making decisions based on facts. Thats hard to do when youre working with your own money.
Efficient Market Hypothesis
Do you know how likely you are to out invest the overall market? What is the likelihood of any one football player being better than most of the other NFL players, and if they are better for a season what is the likelihood that they will be the best of the best for decades?
Efficient Market Hypothesis (EMH) might contain the answer. EMH states that everything known about an investment product is immediately factored into the price. If Intel releases information that sales will be light this quarter, the market will instantly react and adjust the value of the stock. According to EMH, there is no way to beat the market for sustained periods because all prices reflect true or fair value.
For the retail investor trying to pick individual stock names hoping to achieve gains that are larger than the market as a whole, this may work in the short term, just as gambling can sometimes produce short-term profits, but over a sustained period of decades, this strategy breaks down, say the proponents of EMH.
Even the brightest investment minds employing teams of researchers all over the world havent been able to beat the market over a sustained period. According to famed investor Charles Ellis in his book, Winning The Losers Game: Timeless Strategies For Successful Investing.
Opponents of this theory cite investors like Warren Buffett who have beat the market for most of his life, but what does EMH mean for the individual investor? Before deciding on your investing strategy , you need the knowledge and statistics to back it up.
If youre going to pick individual stocks in the hopes that theyll appreciate in value faster than the overall market, what evidence leads you to the idea that this strategy will work? If youre planning to invest in stocks for dividends, is there evidence that proves that an income strategy works? Would investing in an index fund be the best way? Where can you find the data needed to make these decisions? (For additional reading, see 7 Controversial Investing Theories.)
Experience
What do you do for a living? If you have a college degree, you might be one of the people who say that you didnt become highly skilled as a result of your degree but instead, because of the experience you amassed. When you first started your job were you highly effective from the very beginning?
Before managing your own money, you need experience. Gaining experience for investors often means losing money, and losing money in your retirement savings isnt an option.
Experience comes from watching the market and learning first-hand how it reacts to daily events. Professional investors know that the market has a personality that is constantly changing. Sometimes its hypersensitive to news events and other times it brushes them off. Some stocks are highly volatile while others have muted reactions.
The best way for the retail investor to gain experience is by setting up a virtual or paper trading account. These accounts are perfect for learning to invest while also gaining experience before committing real money to the markets. (Learn to trade with the Investopedia Stock Simulator, risk free!)
The Bottom Line
Many people have found success in managing their own money, but before putting your money at risk, become a student in the art of investing. If somebody wanted to do your job based on what they read on the Internet, would you advise it? If you were looking for a financial advisor, would you hire yourself based on your current level of knowledge? Your answer might be yes, but until you have the knowledge and experience as a money manager, managing a brokerage account with money that you could stand to lose might be OK, but leave your retirement money to the professionals.
This could be information held by insiders, competitors, contractors, suppliers or regulators, among others.
Feast thine eyes upon $UYMG BarChart Technical Analysis NITE-LYNX
http://www.barchart.com/technicals/stocks/UYMG
Broker-dealers usually will first determine if they can or choose to execute the trade internally. Internal executions occur if they can ‘match’ (same prices for a buy and sell order) Limit Orders or if they choose to trade for their own account. If they are trading for their own account, they must give investors their limit order price or the NBBO (National Best Bid or Offer) as defined by an Inter-dealer Quotation Systems (OTC Link/FINRA BB) at that point in time.
Taking The Bite Out Of A Bear Market
A bear market is defined as a decline of 20% in the following three major stock market indexes :
• Dow Jones Industrial Average (DJIA)
• Standard
Investors usually focus on weekly and monthly charts to spot long-term trends and forecast long-term price movements.
$TIRXF BarChart Technical Analysis NITE-LYNX
http://www.barchart.com/technicals/stocks/TIRXF
Investigation of Fraud or Other Criminal Activities — There is an investigation of fraudulent or other criminal activity involving the company, its securities or insiders. When OTC Markets becomes aware of such investigation, the companies’ securities may be subject to Caveat Emptor.
Dont Be Misled By Investment Advertising
In the world of investments , it is sadly common for sellers to make claims that are just not accurate, realistic or valid. They promise things that literally cannot be done or at any rate, wont be done effectively or usefully. Novice investors, and more experienced investors alike may be misled into thinking that just about anything is a good and well-managed investment . And one serious mistake can damage someones financial security. But how can you differentiate between hype and reality?
THE PROBLEMS:
Flashy Information
Glossy, attractive brochures (or internet sites) and striking photographs should be dismissed as irrelevant to the investment process. They really do not mean anything. Enjoy looking at them, but dont take them seriously. Focus on the real information and offerings.
Flashy bar and pie charts may be accurate and useful, or just the opposite. And it is not so easy to differentiate between the two. For instance, it is simply deceitful to attract investors into equities by showing a gently rising value line above a very flat and boring bond-performance line. This unfair comparison can easily mislead investors into thinking that the broker or firm in question has done a great job with equities and that they are an outstanding investment. An experienced investor will know that, over time, equities generally perform better than bonds but with far greater volatility and uncertainty. There are also long periods throughout history during which equities are more bother than they are worth. Accordingly, the proportion of a portfolio going into equities must be considered extremely carefully.
Product Complexity
Product complexity lends itself to misleading advertising. Structured products can be remarkably difficult to understand, but to market them simply and appealingly is not difficult. Inexperienced investors are particularly vulnerable.The seller has an obligation to ensure that complexity is not misused to mask risk. The conventional wisdom is not to buy what you cant understand. However, this advice cuts out a lot of potentially good investments. Make sure you get advice from someone you can really trust, preferably someone who does not stand to gain one cent from the transaction. (For more depth on what structured products are, refer to Understanding Structured Products.)
Simple, Yet Misleading
Historical returns are one of the most common problems. Just because something has done well in the past, doesnt mean it will continue to do so. It may even mean the opposite. The market in question may be peaking or perhaps too muchrisk has been taken (hence the high returns so far) and the crunch is coming. In short, projections into the future are, by their very nature, unreliable. What matters is the nature of the product, not what the crystal ball tells you.
Guarantees must be treated with a similarly healthy suspicion. Such phrases as risk-free, safe and protected may actually mean that you will earn next to nothing and might as well put your money in the bank. Or they may be just plain false. The protection may turn out to be inadequate or may not apply when you really need it.
Meaningless or Misleading Service Claims and Promises
Some firms exaggerate their competencies or the level of service they offer. For instance, a claim like we believe that investment success requires regular monitoring and attention to the smallest detail is great in principle. But many firms just do not do this, no matter what they imply. Likewise, promising to maintain a close relationship all year round is vague and often pretty meaningless.
Outright falsehood can also occur. For example, some brokers tell you how they predicted this or that crash or boom. A look at documents from the period in question may reveal that this is just not true. In the investment world, there is no shortage of such scandals. In his promotional material, one broker claimed that he had believed the bull market was in its expensive and speculative phase, and warned his clients accordingly at the time. A skeptical journalist did some digging around and found that the broker had actually claimed that the bear market was alive and well. (In addition to questionable advertising, read Understanding Dishonest Broker Tactics for other possible tricks you should be aware of.)
THE SOLUTIONS:
Regulation
In almost all countries - certainly America and Europe - investment advertising is regulated. In theory, this obliges firms to disclose a minimum level of information and to advertise fairly. Nonetheless, in practice, this does not ensure consistently that the advertising investors read tells them what they really need to know. Unfortunately, regulation is not all-encompassing, and does not provide anything close to full or adequate protection. (Learn more about regulation in our article Financial Regulation: Who They Are And What They Do.)
There are a number of fundamental issues you should be aware of before you buy. First, you need to know exactly what the investment entails – is it equities, bonds , real estate or what? Furthermore, each of these categories has its own subdivisions. Second, you need to know the level of risk and the costs of getting in and out (or of simply staying invested). It is important to understand why you should invest in this right now. True market timing is difficult or even impossible, but it is generally clear whether a particular asset class is a relatively good investment or not at a given point in time.
Do It Yourself
You can do a lot by keeping your wits about you. But, realistically, this only applies to those with a reasonable level of knowledge and experience. Reading articles like this one or getting advice from a trusted source can help ensure you know the score. The media, the regulators and associated consumer organizations can help in this respect. But for the initiated, do your homework. It may be a pain and an effort, but the pain of getting it wrong will be far worse.
The Bottom Line
The ugly reality is that a large number of firms and brokers promote their services with the main or even sole objective of attracting customers and their money. The tendency to diverge from the straight and narrow is always there. There are a number of classic methods of making very ordinary or even bad investments sound good and there are new tricks and new bad investments emerging all the time. Regulation is therefore one of the main mechanisms for protecting the public. The other challenge is to educate the public but this has always been and will remain difficult to do effectively, efficiently and comprehensively. For those fortunate enough to be already reasonably well informed, make sure that you sort out the gloss from the dross before you hand over your money.
Usually, companies are compared with others in the same group. For example, a telecom operator (Verizon) would be compared to another telecom operator (SBC Corp), not to an oil company (ChevronTexaco).
Companies may issue and sell shares in the OTC market pursuant to the safe-harbor guidelines under SEC Rule 144 and 144A.
Followers
|
1493
|
Posters
|
|
Posts (Today)
|
0
|
Posts (Total)
|
821321
|
Created
|
03/04/10
|
Type
|
Free
|
Moderator PhotoChick | |||
Assistants Nilbud ManicTrader |
Posts Today
|
0
|
Posts (Total)
|
821321
|
Posters
|
|
Moderator
|
|
Assistants
|
Volume | |
Day Range: | |
Bid Price | |
Ask Price | |
Last Trade Time: |